Ready cash, no credit is the new market mantra | business | Hindustan Times
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Ready cash, no credit is the new market mantra

business Updated: Oct 21, 2008 20:49 IST

The investor is suffering because of the liquidity crunch being faced by different markets and poor condition of equity markets. This has impacted the mannerReady cash, no credit is the new market mantra in which market activities are carried on and an investor would need to realign himself to this change. Here are some tips that could be useful.

Buying costs
When buying shares, certain process needs to be followed. In most cases the broker buys shares on behalf of the client and takes money within a specific time period.

This process reflects the entire expense involved. This will include the actual cost for buying shares as well as various fees and expenses to be paid to the broker for the services rendered. Till now many investors would pay the specified amount after the transaction was completed.

Upfront payment
There has been such erosion in confidence following the liquidity crisis that many brokers are asking their clients to deposit the necessary amount with them if they want to make purchases.

This means that there has to be an upfront payment before any purchase is made and the broker will allow purchases only to the extent of funds available in investors’ accounts. An investor will not be able to use any credit period in prevailing situation and would have to have the necessary amount ready with him if he wants to make any purchase.

Safety net
This process builds a kind for a safety net for investors, as they will not be able to buy more than what their funds permit.

Due to this reason there is likely to be less speculation and investments will be done only when an investor has an element of conviction in the process and the stock selected. This might seem a negative step because it does not allow an individual to buy anything on margin or by making late payments, but it builds discipline that is sorely needed in times when the overall situation is difficult and the working is not easy.